California Legislature Introduces Bill That Could Result In Massive Penalties For Employers For Late Payment of Wages

Currently working its way through the California Legislature is AB 2613, a potentially massive expansion of liability on employers and individuals for underpayment of wages.

AB 2613 seeks to amend the California Labor Code in three separate ways. First, Labor Code Section 210 would be amended to provide that an employer “or other person acting individually or as an officer, agent, or employee of another person” who fails to timely pay an employee’s wages (not merely final wages) owes a penalty of $200 to each affected employee for each pay period when the wages are late. Not only is this a substantial monetary penalty, but, importantly, the new requirements would impose this liability on individuals, not just the corporate employer. The new provision also makes clear that this new penalty is in addition to, and entirely independent of, any other damages or penalties under the Labor Code. The provision also explains that the $200 penalty cannot be waived by agreement of the employee. Interestingly, the bill further provides that the $200 penalty can be imposed against individuals who violate Labor Code Section 1197.5, which prohibits sex discrimination in wages.

Second, AB 2613 proposes to amend Labor Code Section 1194.2 with respect to liquidated damages. Currently, Section 1194.2 imposes liquidated damages where an employee is paid less than the minimum wage. AB 2613, in turn, seeks to impose liquidated damages any time an employer pays its employee “a wage less than the regular wages owed, when due.” The liquidated damages would be equal to the amount of the unpaid wages. Thus, this provision essentially provides for double damages in any claim for late payment of wages.

Finally, AB 2613 seeks to amend Labor Code Section 1197.1 to impose individual liability on any person acting as “an officer, agent or employee of another person.” Here, the liability would be imposed if the employee is paid “a wage less than the regular wages owed to [her] when due.” As with the other proposed amendments, the liability here could be enormous. Any initial violation that is intentionally committed would incur a penalty of $100 for each employee for each pay period for which the employee is underpaid. Then, for any subsequent violation (no matter if intentional), a $250 penalty would be imposed for each employee for each pay period. The provision specifies that these penalties are to be paid to the affected employee.

Needless to say, if this bill were to pass in its current form, employers could be on the hook for potentially enormous liability if any employee is paid late. Even paying an employee a small amount less than his or her regular wages could create substantial monetary liability for the employer. Moreover, the potentially enormous liability created by these proposed amendments would fall not just on the corporate employer, but upon individuals including officers, agents, and employees. If passed, AB 2613 will likely transform against whom wage and hour class actions are pursued, and it will likely result in many more lawsuits being filed in California. Right now, we can’t say how AB 2613 will shake out – it recently passed the Assembly Labor and Employment Committee – so stay tuned to our blog for further updates on this bill and other employment-related bills currently pending in the California legislature.

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